Alberta Beef Magazine - BeefNews.com

CCA continues to push for a CBEF - BIC merger by Madeleine Baerg
May, 2010

Over the last year, many producers have heard that the Canadian Cattlemen's Association (CCA) is working towards amalgamating the Canada Beef Export Federation (CBEF) and Beef Information Centre (BIC). Understandably, there's a lot of concern: not only would this be a hugely expensive and complicated undertaking, any change in operating structures of the two organizations has a high likelihood of disrupting domestic and export markets.

We caught up with Gib Drury, Chair of CBEF's Board of Directors, to get the facts and current situation from his perspective.

As most in the beef industry understand, CBEF's mandate is to increase export opportunities for Canadian beef in global markets, while BIC is tasked with increasing demand within the domestic and U.S. markets. Both organizations are funded largely by Check-off dollars. According to Drury, marketing Canadian beef internationally and in North America are vastly different undertakings; however, there are some common areas where closer collaboration could be realized. That said, working together as two independent organizations and merging under CCA are two very different things.

Half of CBEF's Board of Directors is "reluctant to merge the two organizations," as Drury puts it delicately. Reading between the lines, what he actually means is "dead-set opposed".

CBEF has many concerns with a potential merger, not the least of which is the loss of its independence. As Drury explains, "It does not serve our industry well if CBEF becomes a sub-committee of CCA. CBEF needs to remain independent."

Currently, CBEF applies for funding from the National Check Off Agency and the Canadian Cattlemen's Market Development Council for bulk of its marketing programs. Once funding is approved, CBEF has the right to make all decisions regarding how best to achieve its strategic goals.

Changes to the operating structure of the organization would likely mean that CCA would likely take a far more hands-on approach to CBEF's operations, which is a problem given that Drury believes CCA lacks the necessary international expertise in marketing and market access. Moreover, CBEF is "much more aggressive than CCA when it comes to trade market access and approaches to foreign affairs."

CCA's attempt to merge the two organizations has been going on for more than two years. According to CCA, significant cost savings would arise from the two organizations combining forces and becoming more operationally efficient. According to CBEF, the costs greatly outweigh any benefit.

Three rounds of consultants hired by CCA recommended that CBEF and BIC amalgamate. That said, from CBEF's perspective, none of the studies showed any operational cost savings or benefits to international marketing efforts. In fact, as Drury explains, "A business case or justification for a merger has yet to be shown."

In January, CBEF hired its own consultant to study the costs and implications of a merger. This study was the first to nail down hard numbers. It estimated the costs of the merger - in terms of severance, relocation, rental contract termination, etc. - to be $3.24M dollars. Adding an estimated $4.8M in lost exports over the three-year transition, the report calculated a total negative impact of $8M.

Drury explains that combining two organizations would almost certainly result in some layoffs. Additionally, the uncertainties surrounding the structure of the merged organization could well impact the morale of international staff; resulting in further losses of key staff and relationships. "If we lose staff who are working for us in foreign markets, we will lose those relationships and that will cost us dearly," says Drury.

Still, with the threat of funding cuts hanging over their heads, the CBEF Board agreed last September to actively participate in CCA's third consultant process seeking a suitable new operating framework. According to Drury, "It's been very difficult for CBEF to participate, with CCA largely cutting us out of the process."

In March, the CCA came forward with the results of its third and last consultant's study.

The primary recommendation is the creation of a 'transitional working group' which would work to create a new governance structure and bylaws, define staffing numbers, levels and profiles, determine office relocation details, etc. The estimate is that this work will take at least a year and cost between $200,000 and $400,000.

In April, Drury represented CBEF at a meeting with BIC and the CCA. For the first time since discussions about amalgamation began, lawyers were brought in to chat about specifics.

Interestingly, it turns out that CBEF's Board of Directors does not have the authority to vote (as they did back in September) to move forward with a merger. According to lawyers, the decision has to go to all CBEF members.

The question is, whether such a decision should happen before or after the transitional working group's work. Drury says, "The problem we have at CBEF is we'll still want to look at the final product before we agree. If we go through a tremendous amount of work and expense of the transitional working group, we should know we're going to move forward."

However, since it'll be up to CBEF members to vote on whether they want a change from the structure that's currently in place, Drury says, "It seems to me that we should first ask CBEF members whether they think CBEF is not performing to their satisfaction and is in need of major change before we spend a whole lot of money and tie up staff in developing a new organization."

Given that an Ipsos Reid survey done recently showed 82% of members were satisfied with CBEF's work, and credited CBEF with 42% of their overseas sales, Drury is "convinced that satisfaction with CBEF is high."

If nothing else, Friday's meeting offered CBEF time. Before the meeting, Drury believed the merger was essentially a done deal. Now, all parties agree that both background operational work and a membership vote have to happen before any merger takes place.

As Drury says, "The ball is back in CCA's camp. We have time on our side. We are still feeling the pressure of the threat that funding could be cut off ... but they've told us that nothing is going to structurally change before 2011."

CCA will be sending a revised letter of intent to CBEF within a week. Then, CBEF's Board will convene and discuss what to recommend to members.

"I don't think it's the done deal that CCA thinks it is," Drury says. "There's definitely going to be some improvements in the organizations. How radical the surgery, will have to be seen."

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